I 

114TH CONGRESS 

1ST SESSION H. R. 4181 

To amend the Internal Revenue Code of 1986 to modify the incentives 

for the production of biodiesel. 

IN THE HOUSE OF REPRESENTATIVES 

DECEMBER 3, 2015 

Mrs. NOEM (for herself, Mr. PASCRELL, and Mr. BLUM) introduced the 

following bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

the incentives for the production of biodiesel. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Biodiesel Tax Incentive 

5 Reform and Extension Act of 2015’’. 

6 SEC. 2. REFORM OF BIODIESEL INCOME TAX INCENTIVES. 

7 (a) IN GENERAL.—Section 40A of the Internal Rev8 enue Code of 1986 is amended to read as follows: 


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1 ‘‘SEC. 40A. BIODIESEL PRODUCTION. 

2 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

3 biodiesel fuels credit determined under this section for the 

4 taxable year is $1.00 for each gallon of biodiesel produced 

5 by the taxpayer which during the taxable year— 

6 ‘‘(1) is sold by such producer to another per7 son— 

8 ‘‘(A) for use by such other person’s trade 

9 or business (other than casual off-farm produc10 tion), 

11 ‘‘(B) for use by such other person as a fuel 

12 in a trade or business, or 

13 ‘‘(C) who sells such biodiesel at retail to 

14 another person and places such biodiesel in the 

15 fuel tank of such other person, or 

16 ‘‘(2) is used or sold by such producer for any 

17 purpose described in paragraph (1). 

18 ‘‘(b) INCREASED CREDIT FOR SMALL PRODUCERS.— 

19 ‘‘(1) IN GENERAL.—In the case of any eligible 

20 small biodiesel producer, subsection (a) shall be ap21 plied by increasing the dollar amount contained 

22 therein by 10 cents. 

23 ‘‘(2) LIMITATION.—Paragraph (1) shall only 

24 apply with respect to the first 15,000,000 gallons of 

25 biodiesel produced by any eligible small biodiesel 

26 producer during any taxable year. 


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1 ‘‘(c) COORDINATION WITH CREDIT AGAINST EXCISE

2 TAX.—The amount of the credit determined under this 

3 section with respect to any biodiesel shall be reduced to 

4 take into account any benefit provided with respect to such 

5 biodiesel solely by reason of the application of section 

6 6426 or 6427(e). 

7 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur8 poses of this section— 

9 ‘‘(1) BIODIESEL.—The term ‘biodiesel’ means 

10 liquid fuel derived from biomass which meets— 

11 ‘‘(A) the registration requirements for 

12 fuels and fuel additives established by the Envi13 ronmental Protection Agency under section 211 

14 of the Clean Air Act (42 U.S.C. 7545), and 

15 ‘‘(B) the requirements of the American So16 ciety for Testing and Materials D6751. 

17 Such term shall not include any liquid with respect 

18 to which a credit may be determined under section 

19 40. 

20 ‘‘(2) BIODIESEL NOT USED FOR A QUALIFIED

21 PURPOSE.—If— 

22 ‘‘(A) any credit was determined with re23 spect to any biodiesel under this section, and 


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1 ‘‘(B) any person does not use such bio2 diesel for the purpose described in subsection 

3 (a), 

4 then there is hereby imposed on such person a tax 

5 equal to the product of the rate applicable under 

6 subsection (a) and the number of gallons of such 

7 biodiesel. 

8 ‘‘(3) PASS-THRU IN THE CASE OF ESTATES AND

9 TRUSTS.—Under regulations prescribed by the Sec10 retary, rules similar to the rules of subsection (d) of 

11 section 52 shall apply. 

12 ‘‘(4) LIMITATION TO BIODIESEL PRODUCED IN

13 THE UNITED STATES.—No credit shall be deter14 mined under this section with respect to any bio15 diesel unless such biodiesel is produced in the United 

16 States from feedstocks approved for the Biomass17 based Diesel program (biodiesel, renewable diesel, 

18 and renewable aviation fuel production under the 

19 Renewable Fuels Program as enacted by the Energy 

20 Independence and Security Act of 2007 (40 C.F.R. 

21 part 80.1426(f) and 80.1416)). For purposes of this 

22 paragraph, the term ‘United States’ includes any 

23 possession of the United States. 

24 ‘‘(5) BIODIESEL TRANSFERS FROM AN IRS REG25 ISTERED BIODIESEL PRODUCTION FACILITY TO AN


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1 IRS REGISTERED TERMINAL OR REFINERY.—The 

2 credit allowed under subsection (a) shall be allowed 

3 to the terminal or refinery referred to in section 

4 4081(a)(1)(B)(i) in instances where section 

5 4081(a)(1)(B)(iii) is applicable. The credit allowed 

6 under subsection (a) cannot be claimed by a ter7 minal or refinery on fuel upon which the credit was 

8 previously claimed by a biodiesel producer. 

9 ‘‘(e) DEFINITIONS AND SPECIAL RULES FOR SMALL

10 BIODIESEL PRODUCERS.— 

11 ‘‘(1) ELIGIBLE SMALL BIODIESEL PRODUCER.— 

12 The term ‘eligible small biodiesel producer’ means a 

13 person who at all times during the taxable year has 

14 a productive capacity for biodiesel not in excess of 

15 60,000,000 gallons. 

16 ‘‘(2) AGGREGATION RULE.—For purposes of 

17 the 15,000,000 gallon limitation under subsection 

18 (b)(2) and the 60,000,000 gallon limitation under 

19 paragraph (1), all members of the same controlled 

20 group of corporations (within the meaning of section 

21 267(f)) and all persons under common control (with22 in the meaning of section 52(b) but determined by 

23 treating an interest of more than 50 percent as a 

24 controlling interest) shall be treated as 1 person. 


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1 ‘‘(3) PARTNERSHIP, S CORPORATION, AND

2 OTHER PASS-THRU ENTITIES.—In the case of a 

3 partnership, trust, S corporation, or other pass-thru 

4 entity, the limitations contained in subsection (b)(2) 

5 and paragraph (1) shall be applied at the entity level 

6 and at the partner or similar level. 

7 ‘‘(4) ALLOCATION.—For purposes of this sub8 section, in the case of a facility in which more than 

9 1 person has an interest, productive capacity shall 

10 be allocated among such persons in such manner as 

11 the Secretary may prescribe. 

12 ‘‘(5) REGULATIONS.—The Secretary may pre13 scribe such regulations as may be necessary— 

14 ‘‘(A) to prevent the credit provided for in 

15 subsection (b) from directly or indirectly bene16 fitting any person with a direct or indirect pro17 ductive capacity of more than 60,000,000 gal18 lons of biodiesel during the taxable year, or 

19 ‘‘(B) to prevent any person from directly 

20 or indirectly benefitting with respect to more 

21 than 15,000,000 gallons during the taxable 

22 year. 

23 ‘‘(6) ALLOCATION OF SMALL BIODIESEL CREDIT

24 TO PATRONS OF COOPERATIVE.— 

25 ‘‘(A) ELECTION TO ALLOCATE.— 


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1 ‘‘(i) IN GENERAL.—In the case of a 

2 cooperative organization described in sec3 tion 1381(a), any portion of the increase 

4 determined under subsection (b) for the 

5 taxable year may, at the election of the or6 ganization, be apportioned pro rata among 

7 patrons of the organization on the basis of 

8 the quantity or value of business done with 

9 or for such patrons for the taxable year. 

10 ‘‘(ii) FORM AND EFFECT OF ELEC11 TION.—An election under clause (i) for any 

12 taxable year shall be made on a timely 

13 filed return for such year. Such election, 

14 once made, shall be irrevocable for such 

15 taxable year. Such election shall not take 

16 effect unless the organization designates 

17 the apportionment as such in a written no18 tice mailed to its patrons during the pay19 ment period described in section 1382(d). 

20 ‘‘(B) TREATMENT OF ORGANIZATIONS AND

21 PATRONS.— 

22 ‘‘(i) ORGANIZATIONS.—The amount of 

23 the credit not apportioned to patrons pur24 suant to subparagraph (A) shall be in25 cluded in the amount determined under 


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1 subsection (b) for the taxable year of the 

2 organization. 

3 ‘‘(ii) PATRONS.—The amount of the 

4 credit apportioned to patrons pursuant to 

5 subparagraph (A) shall be included in the 

6 amount determined under such subsection 

7 for the first taxable year of each patron 

8 ending on or after the last day of the pay9 ment period (as defined in section 

10 1382(d)) for the taxable year of the orga11 nization or, if earlier, for the taxable year 

12 of each patron ending on or after the date 

13 on which the patron receives notice from 

14 the cooperative of the apportionment. 

15 ‘‘(iii) SPECIAL RULES FOR DECREASE

16 IN CREDITS FOR TAXABLE YEAR.—If the 

17 amount of the credit of the organization 

18 determined under such subsection for a 

19 taxable year is less than the amount of 

20 such credit shown on the return of the or21 ganization for such year, an amount equal 

22 to the excess of— 

23 ‘‘(I) such reduction, over 

24 ‘‘(II) the amount not apportioned 

25 to such patrons under subparagraph 


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1 (A) for the taxable year, shall be 

2 treated as an increase in tax imposed 

3 by this chapter on the organization. 

4 Such increase shall not be treated as tax 

5 imposed by this chapter for purposes of de6 termining the amount of any credit under 

7 this chapter or for purposes of section 55. 

8 ‘‘(f) RENEWABLE DIESEL.—For purposes of this 

9 title— 

10 ‘‘(1) TREATMENT IN THE SAME MANNER AS

11 BIODIESEL.—Renewable diesel shall be treated in 

12 the same manner as biodiesel. 

13 ‘‘(2) RENEWABLE DIESEL DEFINED.— 

14 ‘‘(A) IN GENERAL.—The term ‘renewable 

15 diesel’ means liquid fuel derived from biomass 

16 which— 

17 ‘‘(i) is not a mono-alkyl ester, 

18 ‘‘(ii) can be used in engines designed 

19 to operate on conventional diesel fuel, and 

20 ‘‘(iii) meets the requirements of the 

21 American Society for Testing and Mate22 rials D–975–13a Grade No. 1–D or No. 2– 

23 D specifications. 

24 ‘‘(B) CERTAIN AVIATION FUEL.—Except 

25 as provided in subparagraph (C), the term ‘reVerDate Sep 11 2014 02:06 Dec 05, 2015 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4181.IH H4181

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1 newable diesel’ shall include fuel derived from 

2 biomass (as defined in section 45K(c)(3)) which 

3 meets the requirements of a Department of De4 fense specification for military jet fuel or an 

5 American Society for Testing and Materials 

6 specification for aviation turbine fuel. 

7 ‘‘(C) EXCEPTIONS.—The term ‘renewable 

8 diesel’ shall not include— 

9 ‘‘(i) any liquid with respect to which 

10 a credit may be determined under section 

11 40, 

12 ‘‘(ii) any fuel derived from coproc13 essing biomass (as defined in section 

14 45K(c)(3)) with a feedstock which is not 

15 biomass (as so defined), and 

16 ‘‘(iii) any fuel unless such fuel is 

17 chemically indistinguishable from a petro18 leum-derived fuel that meets existing die19 sel, gasoline, or aviation fuel quality speci20 fications. 

21 ‘‘(g) TERMINATION.—This section shall not apply to 

22 any sale or use after December 31, 2018. 

23 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

24 such regulations as may be necessary for the purposes of 


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1 carrying out this section within 30 days after enactment 

2 of this Act.’’. 

3 (b) CLERICAL AMENDMENT.—The table of sections 

4 for subpart D of part IV of subchapter A of chapter 1 

5 of the Internal Revenue Code of 1986 is amended by strik6 ing the item relating to section 40A and inserting the fol7 lowing new item: 

‘‘Sec. 40A. Biodiesel production.’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to biodiesel sold or used after De10 cember 31, 2014. 

11 SEC. 3. REFORM OF BIODIESEL EXCISE TAX INCENTIVES. 

12 (a) IN GENERAL.—Subsection (c) of section 6426 of 

13 the Internal Revenue Code of 1986 is amended to read 

14 as follows: 

15 ‘‘(c) BIODIESEL CREDIT.— 

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, the biodiesel credit is $1.00 for each gallon of 

18 biodiesel produced by the taxpayer and which— 

19 ‘‘(A) is sold by such producer to another 

20 person— 

21 ‘‘(i) for use by such other person’s 

22 trade or business (other than casual off23 farm production), 

24 ‘‘(ii) for use by such other person as 

25 a fuel in a trade or business, or 


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1 ‘‘(iii) who sells such biodiesel at retail 

2 to another person and places such biodiesel 

3 in the fuel tank of such other person, or 

4 ‘‘(B) is used or sold by such producer for 

5 any purpose described in subparagraph (A). 

6 ‘‘(2) DEFINITIONS.—Any term used in this sub7 section which is also used in section 40A shall have 

8 the meaning given such term by section 40A. 

9 ‘‘(3) BIODIESEL TRANSFERS FROM AN IRS REG10 ISTERED BIODIESEL PRODUCTION FACILITY TO AN

11 IRS REGISTERED TERMINAL OR REFINERY.—The 

12 credit allowed under this subsection can be claimed 

13 by a registered terminal or refinery in instances 

14 where section 4081(a)(1)(B)(iii) is applicable. The 

15 credit allowed under this subsection cannot be 

16 claimed by a terminal or refinery on fuel upon which 

17 the credit was previously claimed by a biodiesel pro18 ducer. 

19 ‘‘(4) TERMINATION.—This subsection shall not 

20 apply to any sale, use, or removal for any period 

21 after December 31, 2018.’’. 

22 (b) PAYMENT OF CREDIT.—Subsection (e) of section 

23 6427 of the Internal Revenue Code of 1986 is amended— 

24 (1) by striking ‘‘or the biodiesel mixture credit’’ 

25 in paragraph (1), 


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1 (2) by redesignating paragraphs (3) through 

2 (6) as paragraphs (4) through (7), respectively, and 

3 by inserting after paragraph (2) the following new 

4 paragraph: 

5 ‘‘(3) BIODIESEL CREDIT.—If any person pro6 duces biodiesel and sells or uses such biodiesel as 

7 provided in section 6426(c), the Secretary shall pay 

8 (without interest) to such person an amount equal to 

9 the biodiesel credit with respect to such biodiesel.’’, 

10 (3) by striking ‘‘paragraph (1) or (2)’’ each 

11 place it appears in paragraphs (4) and (6), as redes12 ignated by paragraph (2), and inserting ‘‘paragraph 

13 (1), (2), or (3)’’, 

14 (4) by striking ‘‘alternative fuel’’ each place it 

15 appears in paragraphs (4) and (6), as redesignated 

16 by paragraph (2), and inserting ‘‘fuel’’, 

17 (5) by striking ‘‘biodiesel mixture (as defined in 

18 section 6426(c)(3))’’ in paragraph (7)(B), as so re19 designated, and inserting ‘‘biodiesel (within the 

20 meaning of section 40A)’’, and 

21 (6) by striking ‘‘2014’’ in paragraph (7)(B), as 

22 so redesignated, and inserting ‘‘2018’’. 

23 (c) TAX IMPOSED ON SALE BY PERSONS CLAIMING

24 EXCISE TAX CREDIT.—Subparagraph (A) of section 

25 4081(a)(1) is amended by striking ‘‘and’’ at the end of 


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1 clause (iii), by striking the period at the end of clause (iv) 

2 and inserting ‘‘, and’’, and by adding at the end the fol3 lowing new clause: 

4 ‘‘(v) the sale of biodiesel to any per5 son by any person properly claiming the 

6 credit under section 6426(c) with respect 

7 to the biodiesel so sold.’’. 

8 (d) EXEMPTION FOR BIODIESEL TRANSFERRED

9 FROM A REGISTERED PRODUCER TO A REGISTERED TER10 MINAL OR REFINERY.—Subparagraph (B) of section 

11 4081(a)(1) of the Internal Revenue Code of 1986 is 

12 amended— 

13 (1) by striking ‘‘clause (ii)’’ in clause (i) and in14 serting ‘‘clauses (ii) and (iii)’’, and 

15 (2) by adding at the end the following new 

16 clause: 

17 ‘‘(iii) EXEMPTIONS FOR BIODIESEL

18 TRANSFERRED FROM A REGISTERED PRO19 DUCER TO A REGISTERED TERMINAL OR

20 REFINERY.—The tax imposed by this para21 graph shall not apply to any removal or 

22 entry of biodiesel (as defined in section 

23 40A(d)(1)) transferred in bulk by rail, 

24 truck, pipeline, or vessel to a terminal or 

25 refinery if— 


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1 ‘‘(I) such biodiesel was produced 

2 by a person who is registered under 

3 section 4101 as a producer of bio4 diesel and who provides reporting 

5 under the ExStars fuel reporting sys6 tem of the Internal Revenue Service, 

7 and 

8 ‘‘(II) the operator of such ter9 minal or refinery is registered under 

10 section 4101.’’. 

11 (e) PRODUCER REGISTRATION REQUIREMENT.— 

12 Subsection (a) of section 6426 of the Internal Revenue 

13 Code of 1986 is amended by striking ‘‘subsections (d) and 

14 (e)’’ in the flush sentence at the end and inserting ‘‘sub15 sections (c), (d), and (e)’’. 

16 (f) RECAPTURE.—Subsection (f) of section 6426 of 

17 the Internal Revenue Code of 1986 is amended to read 

18 as follows: 

19 ‘‘(f) RECAPTURE OF BIODIESEL CREDIT.— 

20 ‘‘(1) IN GENERAL.—If any credit was deter21 mined under this section with respect to the produc22 tion of any biodiesel and any person does not use 

23 such biodiesel for a purpose described in subsection 

24 (c)(1), then there is hereby imposed on such person 

25 a tax equal to $1 for each gallon of such biodiesel. 


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1 ‘‘(2) APPLICABLE LAWS.—All provisions of law, 

2 including penalties, shall, insofar as applicable and 

3 not inconsistent with this section, apply in respect of 

4 any tax imposed under this subsection as if such tax 

5 were imposed by section 4081 and not by this sec6 tion.’’. 

7 (g) CLERICAL AMENDMENTS.— 

8 (1) The heading of section 6426 of the Internal 

9 Revenue Code of 1986 is amended by striking ‘‘AL10 COHOL FUEL, BIODIESEL, AND ALTERNATIVE

11 FUEL MIXTURES’’ and inserting ‘‘ALCOHOL FUEL

12 MIXTURES, BIODIESEL PRODUCTION, AND AL13 TERNATIVE FUEL MIXTURES’’. 

14 (2) The item relating to section 6426 in the 

15 table of sections for subchapter B of chapter 65 of 

16 such Code is amended by striking ‘‘alcohol fuel, bio17 diesel, and alternative fuel mixtures’’ and inserting 

18 ‘‘alcohol fuel mixtures, biodiesel production, and al19 ternative fuel mixtures’’. 

20 (h) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to biodiesel sold or used after De22 cember 31, 2014. 

Æ 


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